Discuss various controls over the working of Public corporations in India

-Discuss various controls over the working of Public corporations in India”.

Here in order to discuss the topic, at first we have to know what a corporation is. According to the business dictionary[1] a corporation is a Firm that meets certain legal requirements to be recognized as having a legal existence, as an entity separate and distinct from its owners. Corporations are owned by their stockholders (shareholders) who share in profits and losses generated through the firm’s operations, and have three distinct characteristics (1) Legal existence: a firm can (like a person) buy, sell, own, enter into a contract, and sue other persons and firms, and be sued by them. It can do well and be rewarded, and can commit offence and be punished. (2) Limited liability: a firm and its owners are limited in their liability to the creditors and other obligors only up to the resources of the firm, unless the owners give personal-guaranties. (3) Continuity of existence: a firm can live beyond the life spans and capacity of its owners, because its ownership can be transferred through a sale or gift of shares. Corporations can be mainly divided into two parts:

1. Public Corporations

2. Private corporations

Public corporations are those corporations which are run by the government. They are simply government owned corporations. According to Wikipedia[2] a public corporation can refer to:

· Government-owned corporation

· Public company, i.e. a limited liability company that offers its securities for sale to the general public.

· Corporation. a corporation created by statute, that is owned in part or in whole by a government (examples being are municipal councils, bar councils, universities).

A public corporation is an SOE (State owned enterprise) set up under a specific enactment by the central or the state governments. Their equivalent in OECD (Organization for Economic Co-operation and Development) countries would be statutory corporations.

A statutory corporation is a corporation created by statute. Their precise nature varies by jurisdiction thus they might be ordinary companies/corporations owned by a government with or without other shareholders, or they might be a body without shareholders which is controlled by national or sub-national government to the (in some cases minimal) extent provided for in the creating legislation.

In India, Statutory Companies are simply the public organizations that came into existence through a special Act of Indian Parliament. The Act provides and defines various functions and powers of a statutory body. The Act also defines various rules and regulations that regulate its employees. Every stator company has a specially defined relationship with various departments of government.[3]

Indian definition of statutory companies says that “, A statutory company or corporation is a special body formed by the legislature. This statutory body will have defined and provided functions and powers. It will be financially independent and will have clearly defined regulation over a specific activity or area”

In discussing this topic we will discuss about the public corporations of India, which is a large country and also our neighboring country. we will also discuss about the controls over the working of public corporations in India.

These Corporations are generally formed to meet the special problems arising out of the execution of large scale irrigation and power projects covering more than one State or for other public un­dertakings which may require powers and privileges which could not generally be obtained under the Company Law. The Act or statute defines its objectives, powers an functions. A public corporation seeks to combine the flexibility of private enterprise with public ownership and accountability.

The features of statutory corporation are as follows:-

(1) Management: Statutory corporations are managed by the Board of Directors, appointed by the government.

(2) Accountability: Statutory Corporation is accountable to public & parliament. Hence it is account and audited by the Comptroller & Auditor General of India (CAG). This ensures public accountability.

(3) Appointment: They can freely recruit people and can give promotions and transfers to any employee according to the company requirement.

(4) No Interference: Statutory Corporation can have its own pattern. There is no political interference in day to day working of the corporation.

(5) Objectives: It works on profit objective and as such its activities are commercial in nature.

(6) Service motive: The primary motive of the corporation is public service rather than private profits. It is, however, expected to operate in a business-like manner.

(7) Financial independence: It enjoys financial autonomy. Its initial capital and borrowings are provided by the government but it is supposed to be self-supporting. It can borrow money from the public is empowered to plough back its earnings.

The statutory Boards or Corporation which had been formed in India are:

(1) The Damodar Valley Corporation— 1948.

(2) The Industrial Finance Corporation—1948.

(3) The Rehabilitation Finance Administration—1948.

(4) The Employees’ Insurance Corporation— 1948.

(5) The Reserve Bank of India—1948.

(6) The Air Transport Corporation—1953.

(7) The State Bank of India—1955; and

(8) The Life Insurance Corporation—1956.

The public corporations need not to have a memorandum of association or the article of association as they have to strictly follow the special status. They have their own policies and procedures within the scope of the power provided by the act.

In India, the different forms of control to which the public corporation may be subject to are:

Parliamentary Control, Control by the Public, Government Control, Judicial control and Central agency control.

Parliamentary Control: These public corporations are solely controlled by the government. As public authorities they are subject to the normal controls of constitution and administrative laws to supervision by the Minister, who in turn is answerable to Parliament, and by Courts through the control which they exercise over administrative authorities. The annual reports of these corporations are submitted to the government of India giving an account of the activities and then they are laid before both the houses of the parliament.

Under the Insurance Corporation Act, 1956, besides the auditor’s report and annual report, the report of the actuaries contain­ing the result of an investigation made by the actuaries into the finan­cial condition of the business of the Corporation should also be so laid. The parliamentary control over the public corporation is confined to only broad criticisms and the day to day functioning of the public corporation is outside the functioning of parliamentary control over the public corporations.

Control by the public: The public also has control over the public corporations in India. These corporations are owned by the government and created by special statutes. These corporations are autonomous in functioning. These corporations are built up for the overall good of the nation and the public. So the public can also control the public corporations.

Government Control: In the framework of economic planning in India, the policies, investment decisions and programmes for growth and expansion of public corporations have to be co-ordinated with national priorities and the mobilisation and allocation of resources. Even when investment and expenditure decisions of some of these enterprises do not depend on governmental budgetary support, their overall impact on the economy through backward and forward linkages, their decision to buy equipment from indigenous sources or import, and their claim on total economic resources (especially jn the core sector) may be so important as to require their reconciliation with national planning objectives. Similarly, wage and employment policies of different public enterprises with implications for other enterprises and the national economy are subjected to the same overall co-ordination. There are thus a number of areas where the intervention of the government in the management of public corporations is inevitable in the interests of national planning for this type of economy.

Central Agency Control:

Central agency controls over central public enterprises in India operate as follows[4]:

  1. Board level appointments of the chief executives and full-time direc­tors are made by the Appointments Committee of the Cabinet consis­ting of the Minister-in-Charge of the administrative ministry concerned, Minister-in-Charge of Home Affairs and the Prime Minister. These appointments are made on the basis of the recommendations of the Public Enterprises Selection Board under the Department of Per­sonnel.
  2. Project Appraisal Division and various sectoral divisions of the Plan­ning Commission play an important role in the authorization of major capital projects of individual public enterprises, while the Commission also monitors progress of projects during construction and of units under production.
  3. Public Investment Board, which is headed by Secretary (Expenditure) and is an inter-ministerial committee of ministerial secretaries, autho­rizes major capital investments including those of public enterprises.
  4. Bureau of Industrial Costs and Prices in the Ministry of Industry makes recommendations in respect of prices which are administered by government.
  5. Bureau of Public Enterprises in the Ministry of Industry monitors budgetary implementation and performance of public enterprises and issues guidelines for periodic wage settlements.
  6. Labour Ministry regulates employment policies, provides general guidance on industrial relations and intervenes through its agencies in industrial disputes involving public enterprises.
  7. Home Ministry has a watchdog role through the Central Vigilance Commission, Central Bureau of Investigation, and Central Industrial Security Force.
  8. Commissioner for Scheduled Castes and Tribes may receive direct rep resentations from economically and socially backward communi­ties in regard to the placement and promotion of their members in public enterprises.

Judicial Control: The judiciary also controls the public corporations in India. As statutory corporations or the public corporations itself are created by the statutes. The judiciary has a powerful control over the public corporations. Different powers are vested to the public corporations by the judicial system. The judicial system consists of judges and courts. If there is any misuse of power by the public corporations then the corporation is answerable to the judicial system of the state of India.

These are the various types of controls over the working of public corporations in India. Public corporations are autonomous systems but still they are controlled by the above forces. These corporations are created by statute and these are created for the overall welfare of the people of the state. So the proper functioning of these corporations is very important. This control over the working of public corporations helps these corporations to function properly and to create maximum benefit.


‘Corporation’, Available from: http://www.businessdictionary.com/definition/corporation.html

‘Public Corporation’ Availabe from: http://en.wikipedia.org/wiki/Public_corporation [Accesed on 10th March]

‘State owned enterprises in india: Reviewing the evidence’ available from: http://www.oecd.org/corporate/ca/corporategovernanceofstate-ownedenterprises/42095406.pdf [Accesed on 10th March,2013]

‘Statutory corporations’, available from:- from: http://en.wikipedia.org/wiki/Statutory_corporation [Accessed 10th March,2013]

‘What are statutory companies?’ available from: http://www.thegeminigeek.com/what-are-statutory-companies/ [Accesed 10th March,2013]

Shailaza,B. ’Parliamentary control over public corporation in India’, available from: http://www.shareyouressays.com/111326/parliamentary-control-over-public-corporation-in-india [Accessed 11th March,2013]

‘What are statutory corporations?’ Available from: http://www.indiastudychannel.com/resources/125343-What-Statutory-Corporations.aspx [Accesed 11th March,2013]

‘Public or statutory corporation forms of management and organizations’, available from:-http://freemba.in/articlesread.php?artcode=127&stcode=8&substcode=9 [Accessed 12th March,2013]

‘Essay: Statutory Organizations’,available from: http://extragrades.com/2012/07/20/essay-statutory-organizations/ [Accesed 12th March,2013]

‘Parliamentary control over public corporations’ available from: http://www.shareyouressays.com/111326/parliamentary-control-over-public-corporation-in-india.[Accesed 12th March,2013]

‘India: Chapter 5’, available from: http://www.asosai.org/R_P_accountability_control/chapter_5_india.htm [Accesed 13th March,2013]

[1] ‘Corporation’ Available from:-http://www.businessdictionary.com/definition/corporation.html[Accessed on 10th March]

[2] ‘Public Corporation’ available from: http://en.wikipedia.org/wiki/Public_corporation [Accessed on 10th March]

[3] ‘What are statutory companies?’ available from: http://www.thegeminigeek.com/what-are-statutory-companies/ [Accesed 10th March,2013]

[4] ‘India: Chapter 5’, available from: http://www.asosai.org/R_P_accountability_control/chapter_5_india.htm [Accessed 13th March,2013]